CONSUMER PROTECTION LAW AND SERVICE CHARGE CONCEPT IN INDIA

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The Consumer Protection Act 1986 has been enacted to protect the rights and interests of the consumers against unfair or restrictive trade practices of any trader or service provider. Aggrieved consumers may file a complaint against such unfair trade practices to the appropriate District/State/National Consumer Disputes Redressal Agency established under the Act for redressal of grievances.

The Consumer Disputes Redressal Agencies have been receiving a number of complaints from consumers regarding arbitrary levy of service charges in hotels and restaurants irrespective of the kind of service provided to them. The Finance Act, 1994 only mandates payment of service tax but a general practice of levying service charges against the wishes of the consumers has been adopted by hotels and restaurants.

With regard to this issue, the Ministry of Consumer Affairs, Food & Public Distribution has clarified on 2nd January 2017 that the practice of adding service charges of about 5 to 20 percent by hotels and restaurants isn’t mandatory and in the event that the consumers are not satisfied with the service provided by the hotels and restaurants they can choose to waive it. The Department of Consumer Affairs has held that such a trade practice adopted by the hotels and restaurants is to be treated as an unfair trade practice and that a consumer may make a complaint to the appropriate Consumer Disputes Redressal Agency against such unfair or deceptive trade practices.

The Department of Consumer Affairs has also sought clarification from the Hotel Association of India about levy of service charges to which they replied that payment of service charge is the discretion of a consumer and if a consumer is dissatisfied with the dining experience he/she may choose not to pay it.

The Department of Consumer Affairs has asked the State Governments to create awareness among the hotels and restaurants in the states regarding the relevant provisions of the Consumer Protection Act, 1986 and also to direct them to spread or publish the information through display at the appropriate place in the hotels/restaurants that payment of service charges is discretionary/ voluntary and a consumer not satisfied with the services can have it waived off. The Union Consumer Affairs Minister, Ram Vilas Paswan has mentioned in an official statement that the hotel menu cards should reflect all costs, including service charge, and such service charge should be given to poor waiters.

The confusion as to payment of service charge and service tax has been finally put to rest by the Ministry of Consumer Affairs, Food & Public Distribution and any violation of this decision will attract legal action before the Consumer Disputes Redressal Agencies.

Harini Daliparthy

Legal Associate

The Indian Lawyer

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